075: Unlocking Skills for Tech Equity: How David Banks Leveraged 3 IPOs

00:00 - 00:35 | David Banks: Yeah, and that's the trick, right? A private company, you can't go out and really find out. There's not a stock price to look at. There's no financials really to look at, right? That's right. A private company. What I did was find somebody that I knew within the company, through LinkedIn, through my network. I think for anybody starting out is, whether it's in your profession, but outside of your profession, when you're looking to advance your career opportunity, Network, network, network. And I tell people that I talk to today, young people coming into the business that start with your network.
00:35 - 01:12 | Christopher Nelson: Welcome to this episode of Tech Equity and Money Talk. And this is going to be a good one. I'm excited today to introduce you to my good friend, David Banks, who is a 40 plus year sales executive in technology, working at companies like Interwoven, VMware and Splunk, going through IPOs with all of them. And he's also now transitioned to being his own money manager and CEO of his own portfolio. But today, we're really going to dig into what it takes to trade your time and talent for tech equity and build wealth doing it. Everybody, David Banks.

01:12 - 01:16 | David Banks: Thank you, Christopher. I'm glad to be here. I'm looking forward to this discussion.

01:16 - 01:33 | Christopher Nelson: Yeah, it's going to be good. I know this is stuff that you and I are so passionate about. We love talking about it. And so let's start with You know, where was it in your career when you really realized that equity compensation could help you build personal wealth?

01:33 - 03:08 | David Banks: It really started, my first exposure to equity compensation occurred in 1999 when I went to work for a company called Interwoven. no longer in business today. It was later acquired by Autonomy, which was then acquired by HP. But it was a pre-IPO company that I had joined. And my responsibility as a sales rep was to open their sales office in the Dallas region and to build out a territory. They really had no accounts in the region, and they wanted somebody to come in, develop the region, and start putting together a logo list of customers for them. I received my first exposure to equity. I had, prior to that, been working in sales, as you mentioned, for a number of years, for about 20 years. But it was at that point that I started seeing my counterparts starting to receive equity, and keep in mind, this was during the internet boom, for their expertise. And by that point, I'd had success going in and really focusing my area of sales expertise on opening new territories for companies that previously where they hadn't had clients and developing new business in these territories. So I wasn't afraid to travel. I would travel to one of my territories, Kansas City and St. Louis, right? For a company called Business Objects prior to Interwoven. But it was really with Interwoven that I got this first exposure to equity compensation.

03:08 - 03:18 | Christopher Nelson: So what was that like? So, I mean, I like for people to tell their stories of when you got your first equity agreement, what were your thoughts?

03:19 - 04:42 | David Banks: My thoughts are, what do I do with this? Because at that time, there wasn't a framework and it was relatively new for sales reps at my level to be receiving ownership at a company. But this was a pre-IPO company that I was very excited about. The focus of their business was, on our saying, was taking your business to the web. So as really as mundane as this sounds today, go back to the mid-90s, right? And companies were moving their business to the web, out of brochures, onto a website. And we had software, we had developed software, it was called Teamsight, that helped you automated that task of getting your content quickly to the web. And so, the business value was I can take somebody who's not necessarily a programmer or a coder, train them on Teamsight, and now they can build out my website for me. That's great. Yeah. And it was great, great business value. So, I received this compensation. I'll be honest with you, I didn't, as you coach in your previous podcast, did I go negotiate? No. Did I work, ask for more equity? No. I knew it was something important. But it was so new at this point, I didn't really know what to do. Right.

04:42 - 05:04 | Christopher Nelson: And so you get the equity compensation. And I think this is common, I think, for many people, right, if you get your first equity agreement. There's not a lot of education. You see the company's rocket ship. OK, sign me up. This has to be worth something. How long was it from when you signed that agreement to the IPO? About two weeks.

05:04 - 05:06 | David Banks: What?

05:06 - 06:15 | David Banks: Wow. So it was about two weeks. They had about a month earlier decided, you know, a young company, things move fast. They decided they wanted to open a Dallas office. And then essentially my manager from Chicago sat me down and said, Go find an office. There was no office. And so you've got $500 a month in rent to work with. Like, what am I going to rent for $500 a month? So I did find an office suite, opened up an office, hired an engineer, sales engineer, and we began making sales calls because that's what I was good at. I started, for lack of a better word, cold calling, prospecting into the territory that they wanted me to develop and setting up appointments. So, I got this, my equity offer letter, and two weeks later, the stock opened at 14. I seem to recall my shares were priced at 9.50 because I was later in the cycle of coming to the company. I was priced at $9.50 a share, stock opened at 14, and then did a rocket ride during the internet boom up to 130.

06:18 - 06:32 | Christopher Nelson: Wait a second. Sometimes people forget the volatility that was in those types of stocks. So opened at nine, what was the time between going from nine to 130? It opened at 14, and I was priced at 9.50.

06:32 - 06:50 | David Banks: So it opened at 14 and then it took about, that would have been 99, it took until about 2000, the beginning of 2001, it was at 130. So in about a year, in about a year. Okay.

06:50 - 07:10 | Christopher Nelson: Okay. So, it went out and it probably, do you know where it ended the first day? I don't recall. Okay. So went out and then over time, you know, and, and so tell us again about that experience. Like, did you think at all about how you manage those shares or the value of those shares as time was going on?

07:10 - 09:09 | David Banks: I didn't until the internet began to bust. The boom began to bust. And then I got real serious. So keep in mind, I had this, I was new to equity compensation, and I really needed to focus on going out and finding clients. So as you talk about, I was caught up in the hubbub of a 60-hour work week. I was traveling on an airplane around the territories. I was trying to find clients. I was calling on Enron for existence. for example, and a whole number of other crates and barrels in Dallas. And I was just all over the place, calling on all kinds of accounts. So I was watching the stock, of course. I was excited. I didn't know exactly at that time what it meant. I knew that something good was happening, but I didn't have a structure or an advisor, you know, advisors, financial advisors, which I had, and I had a financial plan, had a financial advisor, because I'd already been building a portfolio in the public markets, stocks and bonds, and had, from my previous success, had Established a portfolio now. This was a piece of it and what it did make me realize is that All of a sudden my financial portfolio got a little more complex, right? They had this thing in it that was growing and doing these things, but I didn't know really how to manage it and Financial advisors, they're mostly interested in assets under management, which this wasn't. This was like a Fidelity account that the company had. So they weren't able at that point, it was 99. They hadn't seen it, I remember when I kind of took it to them and said, hey, look at this thing that I got. What do you do? How did you get that? And what are you doing with that? And so they didn't know really much more about what to do with it either, quite honestly, at least at the advisor level I was working with.

09:10 - 09:32 | Christopher Nelson: Right, and so then as it starts to grow on this trajectory from the 14 to the- 130. 130. And then all of a sudden you start seeing some volatility in the market. Yeah. What, I'm curious, what were people around you saying, you know, in the company, and then what were you thinking?

09:32 - 12:26 | David Banks: So, yeah, it's a really good question because this was new for a lot of people or almost for everybody that was working around me. And we were all caught up in the internet boom. This was pets.com. You got to remember, you know, if you remember that our software was selling like gangbusters, we were doing great. We were, all the things we advertised, we were, we were successfully doing. So the company wasn't struggling. I mean, we were doing quite well. I was receiving nice commission checks, building the business as, you know, according to the territory plan and doing all those things. But when the stock market decides that something is no longer a good thing, right, it doesn't matter. They don't discriminate generally about what your company is and how well it's doing sometimes. So, the stock started turning downward. To answer your question, I started looking at, you know, I'm older than many of the people who were around me at this time. Generally, a lot of the other sales reps were younger than me. And I decided I was going to secure my future, add to the rest of my portfolio by taking my vested shares that I'd invested. I think I'd invested a little over 25%. I hit that first cliff and sold my shares. But people around me were saying, no, David, you don't understand. It's different this time. And this, the internet's redefining business, and this is gonna be nothing but upwards. The stock's gonna be 300, and you're gonna regret it. I said, maybe so, but I'm gonna take what I got, take some off the table, and I'm gonna go do some other things. Actually, we paid off our house with that first chunk. Sure enough, I sold my first group at about 110, and eventually the stock over time ended up at a low of $2 a share. So yeah, it's a sad story because some of those people walked away with nothing. They stayed in and they always kept saying, as it went from 110 down to 80 to 60, 50 to 30, that it's going to turn around. It's going to turn around. And we did a long way, it wasn't just a straight, you know, we had little spikes along the way as you normally do in the market. You know, come back up a little bit and everybody was cheering that on. But everybody was so caught up in the frenzy of the internet craze. I had been fortunate to have probably more experience in the investing world than some of my counterparts did. I know that business cycles occur. I know markets go up and markets go down. And I decided at this point that it would be best to take what that portion of my equity compensation and do.

12:26 - 14:22 | Christopher Nelson: Right, because at that point, if I'm understanding your package correctly, you'd vested 25% or a little bit more. So you're like, okay, I have this vested that now is liquid, that I can go access it. It's a very highly appreciated value. I'm gonna have 75% more that I'll have access to in the future. Let me go take this off the table. And this is something I think is so important. You and I talk about this a lot of how do we, If we're going to speak to young tech employees or people early in the game, they don't have to be young, you and I were older dogs in the game getting into it, but is really understanding some fundamental concepts of How do you make sure and secure your financial future first? How do you have, and I remember I was having a conversation with somebody the other day. We were on a coaching call and they were looking, they wanted me to help them evaluate a new offer because they were at a public technology company. And they were then looking at a, a well-developed startup that could be an IPO, but they were at a business-to-business company, stock had value, it was growing, and then this other company is a B2C company, better title, That compensation salary had maybe a 15% increase, but all this stuff was unrealized gain. Here, they'd probably taken off the table maybe $500K or $600K, had $1.5K to go. So you think about it, they could put $2K in the bank after this thing vests versus Unknown over here, right and I tried to let them know my advice to them was clearly like hey this there's a lot of unknown here you have a direct line of sight to saying I'm gonna put a good foundation for my family in first I just I just want to make sure that people know That's a critical lesson.

14:22 - 16:08 | David Banks: It is a critical lesson. And also another lesson I took away from that, from investing, and you still hear today, is that people were telling me, but David, you don't understand, it's different this time. What I would say to people is, when you're investing, that has never held up. There's a quote attributed to Mark Twain, who said that history doesn't repeat itself, but it rhymes. And what does that mean? Well, if you look at the stock market, for instance, and at that time, the internet bubble, right? We've had other bubbles. Since then we in 2001 we had the internet bubble burst right in 2007 2008 we had a financial crisis over homes Right here in home loans. Yeah. Yeah home loans It was another business cycle in It was another cyclical event. It wasn't a repeat of history per se, but they rhymed. Those parallels that occurred, and we have it now going on today with offices and commercial real estate. So when somebody tells you it's different this time, just remember that it probably isn't. History has shown that it is not necessarily different, that history does rhyme. And that caused me to say, okay, you may be right, Time will will determine who turned out to be correct on this But I'm gonna go ahead and secure my future and take this this 25 to 30 percent off right now off the table Well, and that's and that's the other thing I think you know that I really try to make sure and share with tech employees working for equity is

16:09 - 17:35 | Christopher Nelson: look at the entire package if it's in pieces. And while wealth is built in concentration, it's actually grown and managed through diversification. And so having a strategy to take it off the table is critical because of what I've come to understand, because there's many stories like the one that you told where people get into a stock and they literally are watching it fall. And what I think people don't realize is that if you have a clear plan that says, I want to divest, I want to go into this engagement, I'm going to sign a four-year contract, and I want to put a million dollars in the bank. I mean, that was my goal going into Splunk. When I went into Splunk, that was my goal. It's like, I just want to walk away from this thing with a million dollars in the bank. Then what you do is, as you're managing the stock, you're going to have a very emotionless way of, okay, I need to fill this up and can't be playing games. What happens is, when it falls, people get into their… their animal brain, which animal brain is what? It's fight, flight, or freeze. And they're not pressing the sell button because they're in this panic mode versus when you have a clear plan or a goal or a vision, you're like, oh, I've met the goal, now let me achieve that goal and then see what's gonna happen next.

17:35 - 18:05 | David Banks: Yes, and that experience was, Like I said, it wasn't a new experience for me. I had made some of those mistakes prior. Investing in public markets, buying a stock, holding it too long, taking a loss when I shouldn't have. So fortunately, this experience came along and I'd had the history and experience of somewhat managing my own portfolio to realize what might be happening and moving out of it.

18:06 - 18:31 | Christopher Nelson: So now, let's talk about interwoven, so the stock's going to zero. When do you start realizing you have now this asset that's your skill set, that now you've proven it out in tech, you've gotten your first set of equity compensation, when do you realize, you know what, I could actually go trade this for equity elsewhere?

18:31 - 20:41 | David Banks: That solidified that. I suspected it was coming into Interwoven because I'd had success prior. I'd been very successful at business objects building out their territory. They'd sent me to Bali on a company trip and all that. And so I suspected it. It proved out at Interwoven because I was successful there despite what the stock was doing. I had a really good run with them. When it became apparent that Interwoven probably wasn't going to survive as a standalone company, I started looking for the next play. And this was in the middle of the internet collapse. This was 2002. And the engineer that I had hired at Interwoven had already left the company. He'd cashed in his cards and left already. And through my network, I discovered this company that was pre-IPO, pre-acquisition called VMware. And the same story. Essentially, my former engineer arranged an interview for me with the VP of sales, a gentleman named Carl Eschenbach, one of the great tech leaders of the day, and the founder, Diane Greene. And essentially, I had a pitch deck in which I pitched myself the asset and said, here's what I can bring to the table. And I do what they need, from what my engineer told me. They needed somebody to, again, open a Dallas sales office, somebody to go out and secure new accounts, somebody who would work hard, travel hard, and build out their business. and was familiar with the territory, which I was. So they made me an offer. They made me an offer that included equity and salary. Liquid equity, of course, because they were private now. All of us went there thinking that this was going to be another IPO after the markets would recover. Again, we were in the middle of the doldrums, kind of like it feels like today a little bit, right? Things were tough. People were getting laid off. There were a lot of people.

20:41 - 20:42 | David Banks: This was a difficult time.

20:42 - 21:09 | Christopher Nelson: Layoffs, yeah. Tight capital market too. I know interest rates were really high back then. Exactly. So let me ask you a couple questions about the deck because I think this is something that is so important for people to understand is that when you see the opportunity did you had you heard at this let me ask you a quick qualifying question had you heard at this point about the technology and understood the power of what it was?

21:09 - 23:29 | David Banks: I knew it. It was virtualization. I was very familiar with it at the mainframe level, but this was different. This was virtualizing the Intel chipset, which many people said could never be done. And there's that thing again, it can't be done or it's different this time. But Diane Greene and her husband figured it out. And so at the time, the company had some success selling their software for workstation virtualization. But now they wanted to go into the enterprise. So they had an enterprise version of the software. Quite frankly, it was still a very early stage. We sold it just really into server production environments because nobody would entertain really taking their production servers, excuse me, not into production environments, we were selling it into the pre-production environments, into the test server environments. Nobody was going to put it into their production environments because of the risk involved, right? Untested technology. So, I hadn't heard of the technology, but I got familiar with it. I knew of it from the mainframe days, and I thought to myself, you know, we're in a cost-cutting period right now in the middle of the boom. People weren't wanting to buy any technology at this point. So, it has gone from this, let's buy all the technology we can, because it's the internet, CIO saying, we're buying nothing from anyone. This was the heyday, this was the prior heyday of Sun Microsystems, Cisco, when they couldn't even keep up with shipping equipment. But now, all of a sudden, we slammed into a pretty hard stop. And I thought, well, one thing this technology does is it gives you the ability to take and virtualize servers, essentially combine multiple servers, Into one and At the time it would only do about three or four or five But eventually it did 20 or 30 right and I thought you know CIOs might listen to this story right now And I initially thought this is probably a two to three year play. Okay, and Maybe we'll go public But right now, nothing positive is really happening. This looks pretty good.

23:29 - 23:36 | Christopher Nelson: And so then you created a deck. How did you help me understand, what was some of the messaging in the deck that you presented to Carl?

23:36 - 24:17 | David Banks: The messaging was straightforward to Carl and to the other people I had an interview with . Here's what I can bring to the table. Here's what I can do for you in building out a territory. Here's my experience, my track record. Here are the W-2s to back it up, that I'm not making all this up. It was a PowerPoint deck and it wasn't real long. It was about eight slides. At the time, I had it bound and printed out on a high-quality laser printer, and it was a flip chart. And I made multiple copies when I flew out to California for my interviews. I left them with something other than just words.

24:17 - 24:29 | Christopher Nelson: Right, right. Like, hey, here's it. That's so powerful. I think I've had some people interview me over the course of my career, and whenever they left something behind, I always found that very, very powerful.

24:29 - 25:05 | David Banks: Yeah, because normally, and I was in later, much later on in a sales management role, you're interviewing dozens of people, right? And after a while, when you're out there and working, caught up in the course of the day, it's hard, sometimes it's hard to remember exactly what Christopher Nelson said to me. Jim or, you know, Jane and all that. So, yeah, I always thought the lead behind is a little bit old school-ish, but was helpful because, you know, there in writing was what I committed I could do for them.

25:05 - 25:27 | Christopher Nelson: You could bring to the table. And so then, now you're here at round two, You get the equity agreement. Now that you'd been through that round one, you actually then had taken some dollars off the table. What was your approach and attitude coming round two? And you now know, okay, I'm bringing something to the table. Like this team really wants me.

25:28 - 26:49 | David Banks: Yeah, so my attitude was I was very excited about it because I knew what this could mean and this could be another success. So they made me an offer. I stressed to Carl that, hey, I would take less salary for more equity. They made some adjustments, but it was nothing really significant. It was a very pleasing offer. I accepted the offer. What changed was, and that nobody realized might happen, was that Instead of a pre-IPO, Diane decided to sell, Diane Green, CEO, decided to sell the company to EMC. And so that, I think, upset some people who came on board for what they thought was going to be an IPO. It was definitely a different plot twist. But I said, hey, look, you know, EMC, a very reputable company, although they were going through their challenges. People were buying less disk drives and they had seen the sales fall off too, like everybody else in technology, but good company. And some people chose to leave that weren't happy with working for EMC. I chose to stay.

26:49 - 27:01 | Christopher Nelson: Well, and then, wasn't it a few years later? So then help me understand, how did that, How did that affect your stock agreement? Did you get some compensation for that?

27:01 - 27:33 | David Banks: Essentially, our shares were converted to EMC shares and what the real value came from and where it paid to stay was later on EMC spun off 10% of VMware to the public market. Right. So there's your IPO, essentially. And that was a pretty momentous event for me because I not only had stock options, but I'd been successful at VMware and they'd pretty well handcuffed me to the company by that point in terms of additional stock options.

27:35 - 28:31 | Christopher Nelson: Well, and that's something, it's important for people to realize, when you get into a company, you've now, you walked in the door, you said, here, what I really love about the message that you create there, and that is like, here's what I can do for you, which is what I always try to tell people is, speak in terms of results. You want this office, you want this territory built, here's David Banks, here's the easy button, and here's all the stuff that shows you the business case that says, here's why you should press this easy button. Then you go in there and you deliver on it. This to me is classic technology or equity compensation playing out, which is, okay, now let's lock this guy up in the golden handcuffs, make him more and more of an owner of this company. And then you get to this moment where they spin it out into the market. Did they create an event around that day? Yes, they did.

28:31 - 30:04 | David Banks: Oh, yeah, there was an event. Diane was never one for a big show. And she was a tech executive. And so we didn't have a bar set up and all the things they sometimes did or like they did for the Splunk. So it was very low key. But it was still nonetheless exciting because we were featured, I think it was in Fortune magazine, the IPO. It was a big event. The stock market was excited about the IPO. The stock shot up. I don't recall the exact percentage, but there happened to be an open window and I'd bought some stock on the day it opened up. And so I was heavily leveraged into the stock by this point. because I was in the stock purchase plan, and I always, in the stock purchase plans, always, always… in any of these plans, paid myself first. So the first thing I did was always max out my 401k, even before equity compensation. Then I would max out all the stock I could buy in the purchase plan, which would be over on top. And then I would figure out how to live on the rest of that money that was left over in my paycheck. So I was pretty heavy. between buying more stock, the options, which hadn't sold any yet, and the stock purchase plan. So it was a very momentous day for most of us, but it wasn't a big party scene or anything like that. Right, right.

30:04 - 30:16 | Christopher Nelson: Well, yeah, we'll get to that party in a second. So then help me understand a little bit of what was then your strategy. Sounds like you were then really overweight in VMware stock.

30:16 - 30:39 | David Banks: Yeah, I truthfully was. And that's when that worked out. It worked out well. I took a couple of hits along the way as the stock dropped on a couple of occasions. But I should have, you look back on it and say, I should have lightened up and I should have diversified more into some other things. And because I was taking a way more risk than I should have. Right, right.

30:39 - 30:48 | Christopher Nelson: Okay. So so and then it sounds like then you then had a plan because at some point you started Realizing okay. I need to start divesting out of this.

30:48 - 32:47 | David Banks: Yeah moving in the right direction Yes, so I was there from 2002 till 2010 through 2010. So about eight and a half years and it was really good to run a great company to work for and it is just really when I look at pre-IPO companies at that time, I was looking for a disruptive technology, maybe a technology, and it's very rare, that would create a paradigm shift. And if you think about VMware and what it did at the time, I mean, today, you know, virtualizing servers and containers. I mean, it's so common, we don't think about it anymore. But that was a paradigm shift in how we deployed servers. And it was so huge that it was created, it was the best acquisition for EMC and it went down in history as one of the best acquisitions. Oh, I'm sure. This was a Joe Tucci EMC acquisition. It went down in history as probably one of the best acquisitions ever made because I seem to recall they picked up VMware for approximately $620 million, I believe. Wow. Yeah. And so, of course, the company was worth a factor multiple X. times, much more than that. So it was a great event. I loved it. It was a great company. They had great technology. They had great leadership. They had a great culture. So in a culture, I like to look for a culture where the people have a high sense of urgency. So sometimes today when we think about culture, we're like, these are free lattes and ping pong, right? That's not culture, right? That's free lattes and a ping pong table. What I wanna say is, do the people who work there have a high sense of urgency to get things done? And this group of people really did. And so they also went out of their way to please clients. So really we had hardly any turnover clients. They also took care of their employees.

32:47 - 32:55 | Christopher Nelson: So now you get to the end of the VMware run, was it? Did you just need a break?

32:55 - 34:09 | David Banks: I did. I needed a break. I was traveling, working 60, 70 hours a week. I was really, at that point, not developing new accounts anymore. I was really responsible for two large telecommunication companies, two of the largest, they're common knowledge, I won't name them here, but common knowledge telecom companies, two of the largest in the country. And so I managed those accounts in Grumman where we did what they call ELAs, Enterprise License Agreements. did multiple million dollar deals with each one of those. And so I, at that point, I kind of, I felt like I had made the run. I think when I joined the company, there were about 200 employees. When I left, there was something like 15,000. So I enjoy working for the smaller company. I'm a better fit for them. I can, I feel like I can bring more value versus a larger company. And so I was ready to, as much as I appreciated everything Carl and company had done for me, I was ready to move on to the next, the next pre-IPO company.

34:09 - 34:10 | Christopher Nelson: And so you took some time off?

34:11 - 34:33 | David Banks: I actually went to a startup, a true startup, and I made a lot of mistakes. I didn't do the very things that I evaluated the previous two companies on, I didn't do. I think it was because I was burned out at that point. And I was just ready to make a decision. And I made a decision, I made a bad decision.

34:33 - 35:27 | Christopher Nelson: Well, I can relate so much. I mean, that's how I chose my first bad startup when I left after a long run at Accenture. And I think that when you're burnt out, my wife gave me this expression, I think it's very valid in the scenario, it's like you're running from something, you're not running to something. And so you're making these emotional decisions, because it's like, I gotta get out of this, I'm so scorched. I'm gonna run to this, of course this is great. And it's just these big emotional laden decisions versus that. we want to try and have a passionless process that says, okay, what's really the best fit for my skills, the best investment for our time? So then what did you do differently in selecting the next company?

35:27 - 37:07 | David Banks: Well, I went back to my playbook of looking at companies. And so the company I went to work for briefly, and I was only there for about four or five months, and I realized that they'd misrepresented to me the capabilities of their technology. And that they were just hoping I could come in and sell stuff for them. That was on me. I didn't do my due diligence. And I didn't talk to customers. I didn't do the things I should have and I should have done. So after four or five months, we mutually agreed to part ways. And I've been looking, I've always even VMware was always evaluating companies and paying attention to the technology and looking for that next company that would bring business value, which is probably going to create success, right? So if you look at Interwoven, they created business value by automating the process of taking content off of paper to the web. If you look at VMware, they created great business value because CIOs could take a room full of servers. I used to go into data centers. One of my big clients was the main energy provider here in the Dallas-Fort Worth area. And I went into their data center prior to VMware. It was off of Stemmins Freeway in Central Dallas, a giant building. Over a couple of years, they adopted VMware. And I went into that data center again. And there were maybe about 20% of the servers in there running VMware. So it was just mostly a big, empty space. Space. Space, right.

37:07 - 37:08 | Christopher Nelson: Yeah, the wall.

37:08 - 37:16 | David Banks: We went from a room to a wall. Exactly. So the business value was just really just- Written on the wall. Yeah, written on the wall, back of the napkin, easy to figure out.

37:16 - 38:36 | David Banks: Right. So I got back to evaluating based on the things that I knew were important about pre-IPO companies. Like I pointed out, great leadership. offers great business value, takes care of their customers, takes care of their employees, has a culture with a sense of urgency, all of these things. I'm not interested in companies that have cool technology. That doesn't really mean anything because, and I think Diane Greene once said it to me, she said that we want to be a company that's relevant. and that means something to other companies. So to me, it was companies that brought true business value. And that happens either by increasing sales, reducing costs, or automating some process that helps redeploy workers onto another task. And so I got back to that, and then that's when I found, and through my network, I started networking again, contacting people, and I'd heard about this company called Splunk, and I'd run into them a few places, and actually competed with them on one of the situations I was in, and I was like, I need to work for that company, because I could see, just even from a distance, the kind of value that they created for their customers.

38:37 - 39:49 | Christopher Nelson: I'm so curious to know, you have Interwoven, you have VMware, and like you said, and this is one of the things that I really try and really want people to understand is that when you start having this lens of what does a great company look like that can deliver value, that will also increase in value, That then reduces your risk, right? Here you go, and it sounds like you went three for four, you're a baseball guy, right? And so, and part of that had to do with you knowing what your pitch looked like. You're like, I can go yard on this thing because I know what my pitch looks like. And so you then, you had the swing and the miss, and you're like, okay, let me get back to my playbook. I know what this looks like. What? What were some of the indicators? You talked a little bit about talking to customers, understanding the problem that it solves, the value that it delivers. What are some of those key due diligence things that you feel really accentuate, especially from a private company where there's much more risk with the equity?

39:49 - 41:05 | David Banks: Yeah, and that's the trick, right? A private company, you can't go out and really find out, there's not a stock price to look at, there's no financials really to look at, right? That's right. A private company. What I did was find somebody that I knew within the company, through LinkedIn, through my network. I think for anybody starting out is, whether it's in your profession, but outside of your profession, when you're looking to advance your career opportunity, network, network, network. And I tell people that I talk to today, young people coming into the business that start with your network. So I learned about it. I talked to somebody on the inside of Splunk. He was a sales director that had previously worked at VMware. And so I really got the lowdown on how things were going. Are companies adopting this technology? Yes, in a big way. Does it solve a real problem? Yes, in a big way. So he was able to confirm a lot of those things and then put me in touch with other people inside of the company, kind of in his network, before I ever even interviewed with the company, to validate what I thought was happening inside the company.

41:06 - 42:21 | Christopher Nelson: Again, I think some of the takeaways that you're giving here for people to understand is, first, that book that you created that shows, here's my results, my value I can deliver. as I try to explain it right, if you're the asset. You're actually the thing of value. And so you wanna make sure that you're trading it for something of value. You're not trading it for the iron pyrite, the fool's gold. And this is a technique that I use too, that I think the people who really do due diligence on companies, whether you wanna call it a backdoor reference or informal interview, talking to people in the company, even before you start to interview, to really understand and dig into, you know, especially these private companies, you know, what are these, you know, key important things around the product, around the culture, around, you know, hey, you know, I always would ask, like, are we hitting the numbers? Like, are people hitting the numbers? Are they not hitting the numbers? That's great. You know, people are happy to come into work. And then you obviously start asking about the leadership. So when did you start learning about the sales leadership there and that culture?

42:21 - 43:15 | David Banks: I spent about a month talking to people before I ever went on the first interview. And you've really named off a number of items. I mean, I could probably go for 45 minutes just on the topic, but I know we don't have that much time. So yeah. The leadership is critical. Have they done it before? Have they taken a company public? It was at Splunk, Godfrey Sullivan, right? Both work. Yep. Had done this before with Hyperion. That's right. And so I want to know that. I want to know not just people make the numbers. What percentage of people are making their numbers? In a younger company, it should be closer, in my opinion, to 70, 80%, 90% of your people at that stage. Now, over time, compensation management sets in and all that, but at that point, in a young company like that, if only 30 or 40% of the people are making their numbers, that's a red flag for me.

43:16 - 43:36 | Christopher Nelson: Wow, I see. I don't think that is going to improve. One of the things I want to do after this is I'll show you my criteria. I want you to add on to yours because that to me, I never thought about that. But as a growth indicator, if you have what I think I heard you say is 70 percent of your reps are hitting their numbers.

43:37 - 43:40 | David Banks: Should be 70% or plus in a young company like that.

43:40 - 44:12 | Christopher Nelson: And that makes sense. I mean, cause the, to me, I mean, and this is again, like for, for, for people who haven't seen this before, it may sound a little outlandish, like what? Like 70% of your sales guys hitting your numbers. When you have a disruptive technology like Splunk was, And people are, you know, and it's going in and solving real problems for IT operations, I think for a lot of, you know, web engineering, a lot of different support teams. It will fly off the shelves.

44:12 - 45:31 | David Banks: It will, yes. I mean, you still got to go out there and you got to develop a territory and you got to go make the calls, you got to build a business. And so that takes time too. People used to tell me, it's like, well, VMware, you had it so easy because it just flew off the shelves. And I would tell them the story that in some of my earliest prospecting days, I would call up the CIO and executive and I had people hang up on me and I said, I can take five of your pre-production servers and put them on one. And I had one, a very large international oil company down in Houston, finally agreed, said, yes, you can come in, this was at VMware, and do a presentation. So this was in 2003, I believe. You can come in and do your presentation to my team, but if you mention one word about virtualizing production servers, the meeting will end immediately. And so Carl Eschbach had the idea that, don't ever go in and talk about virtualizing production servers. We're going to virtualize the pre-production servers. And then over time, as we establish trust and credibility, we'll get their production servers. That's what it took. So it was actually the early days of VMware because we were selling a paradigm shift, literally. People were not just jumping on the wagon to sign on and start

45:32 - 45:47 | Christopher Nelson: deploying it was a tough selling well and i know i know splunk too from that technology i think again it's when when something's so disruptive people struggle with like is this really going to work or is it sort of vaporware right you know because there's been a lot of

45:47 - 46:18 | David Banks: of vaporware sold, and who is going to put, in IT, who's going to put their career on the line? Because I come in and say, hey, that log data that you've got sitting over there on that production system, let's roll it into Splunk and see what happens. They're going to want to do a test, and they're going to have a proof of concept. And so that's how technology gets adopted. It really is take some time. So disruptive.

46:18 - 46:24 | Christopher Nelson: So then let's talk about the third third times the charm So all of a sudden you're looking at the the Splunk equity deal.

46:24 - 47:41 | David Banks: Yeah, so that You know by then I kind of knew I wanted more equity my portfolio was in a place where I didn't really so much care about the risk. In fact, from VMware to Splunk, I actually took a pay cut to come join the company. And I asked for more equity, and they provided me a little more. Wasn't anything outlandish, right? But I did take a pay cut to come over. But I wanted to be a part of the company. I didn't care about the pay cut, quite frankly. because I felt at that point that technology was so disruptive and was going to be so successful and based on my due diligence I'd done from talking to people inside the company, I thought that my equity compensation and my success selling it with 3, 4, 5, 6x supersede the pay cut, right? And it did. So I didn't care about a pay cut. For me, it was never about the salary. If you're in sales, if you're focused on the salary and not the bigger compensation package, then you probably shouldn't be in sales. So yeah, I took a pay cut. I was totally fine with that. I was excited to be at the company.

47:42 - 48:00 | Christopher Nelson: I mean, it's really, there's so much in there, and to your point, we could keep going. How did then, so then post-Splunk, did you realize, did you just realize, hey, I'm getting to the end of Splunk, and I think this is it, I've had a good run, I've sort of built my portfolio, and now…

48:01 - 49:06 | David Banks: It is exactly it. At this point, I'd set a goal. I'd said to myself, I wanted to potentially be in a place where I could retire at age 55, due to some personal circumstances, a divorce, that was delayed until I was 59 and a half. So at 59 and a half, I decided, okay, I'm ready to go do something different. I'm not ready to retire. I don't think of myself as retired. In fact, one of my friends tells me, he says, David, you never really retired. You're just doing something different now. And so I was ready to do something different and try something new. and really expand on what I was already doing, which was being the manager of my portfolio. Right. And also expanding out and having the time now to look at other investments such as in commercial real estate. So we transitioned our portfolio from being stocks and bonds and equity compensation to now including alternative investments such as multifamily apartments and mobile home parks.

49:08 - 50:36 | Christopher Nelson: Wow, well, we're gonna have a full episode on that later, but I think, so let's just go back and I just wanna rewind because there's so much goodness in this career of building your career as an asset, realizing, okay, here's what I can bring to the table, I can go market this, and then going to Interwoven, working for that company, being able to, take your first chunk of equity off the table and really start continuing to build out and pad the portfolio. Then you go to VMware, you realize, okay, this is very disruptive technology. You're continuing to mature your due diligence criteria, your selection criteria, have a great run there. And then you cap it off with Splunk, which I know is an amazing, you know, product, culture, company, and the upside for all of the early pre-IPO and even post-IPO employees I know did really, really well. Of that journey, what would you… Try and boil up a couple of things. What would you tell people about how you should manage yourself a little bit as an asset? What were some of those things? And then also, what should they look for in equity? What should they be trading for?

50:36 - 54:06 | David Banks: So it needs to start early on in your career. Although it could happen later too. You could get religion later on and really work on these things. But really have the mindset that you are the asset. But then you have to do the things, you've got to take that mindset and then you've got to go off and do some other things. You've got to go develop the skills and the expertise and get the experience that people are going to find value in. And also look at yourself and understand hopefully you're passionate about what you're doing. That's critical because if you're not then you should find another line of work. I was always very passionate about my job and what I did in my career. I loved selling. I loved selling technology. I graduated college with a technology degree, so I kind of knew where I was going to land. I started out in 1982 working for NCR, which had one of the best, next to IBM, one of the best sales training programs in the country. So once you see yourself and you get that mindset of I'm an asset, work on the things that you need to do to really bring value to the type of company. And also, Try to differentiate yourself. So I started out figuring out that these young companies were all about trying to get new logos and new accounts. Well, I happen to be pretty good at that. I had an ability to do that. I wasn't necessarily the best big account manager guy out there. There were people much better than me at that. And that wasn't necessarily my forte, but what I was good about was fearlessly going out and calling on companies that never heard of my technology before and securing a meeting, securing a demo, and then securing a sale. And I would put together a territory plan. I kind of figured out across business objects, across Interwoven, that that I had this ability to do that. And companies found value in that because they wanted to capture. In the early days of Splunk, as you remember, it wasn't even necessarily really about profitability. It was about gaining new logos. That's right. In VMware, it was about gaining new logos. We lived in fear daily that we would get Microsoft. And by that, I mean that Microsoft would roll out their operating system, which they tried to do, although it wasn't as good as our software. A feature made a feature out of virtualization and essentially cannibalize our whole business. So we lived in constant fear of that. My point is that once you see yourself, you get this mindset of an asset, go out, develop the expertise, get the experience, differentiate yourself, and figure out what do you bring to the table right now in the world of AI, right? The people who have that skillset, that experience, are able to differentiate themselves. And then, as you pointed out in a couple other podcasts, you gotta be able to go out and tell that story once you've done it. You've got to tell them whether, you don't have to do it my old school pitch deck way, but do however creatively you can to leave them with the impression that I've got these skills, I've got this success, and I can deliver what it is I know you need. And that involves doing your due diligence on the company, understanding what it is they need. And in all those cases, I knew those companies needed new logo accounts. And that just happened to what I was able to specialize in.

54:07 - 54:19 | Christopher Nelson: That's great, and then it sounds like then over time, to compliment that, you then just really focused on doing great due diligence, working for pre-IPO companies that you knew were gonna increase in value.

54:19 - 54:36 | David Banks: Yes, and develop that checklist, some of the things that you and I have talked about today, and have that checklist, do your due diligence, talk to people inside of the company, as many as you can, and, because you won't, you can do all the Google searching you want, you're not gonna uncover

54:37 - 54:58 | Christopher Nelson: It sounds to me, because you brought this up a few times, that's really your secret sauce, that whole being able to get inside the company, talk with people. It sounds like that was one of your key steps and due diligence is, if you could get in there and talk to people and really understand, that was gonna be the big drive.

54:59 - 55:18 | David Banks: Yes, because many of these people I talked to had already been there for several months and they were living the experience and they knew what the culture was. They knew what the leadership was. They were there. They were on the ground and they knew what the results were. And so finding all that out inside the company was hugely helpful.

55:19 - 56:02 | Christopher Nelson: Well, this has been tremendous. And I've enjoyed it. Yeah. Yeah. I mean, just just having this conversation, I mean, getting the opportunity to learn more about you, to learn more about your experiences. But this is the first half of the journey. Right. Right. And so so for you listening, you know, what David is, is David is a example of the things that I teach of how do you trade your time and talent for equity? And then how do you that how do you manage that money as a business? And so We're gonna put a bow on this episode, let you enjoy it, soak it up, re-listen to all the tidbits, but we're gonna come back in the next episode and we're gonna be talking with David about how do you manage your money like a business. All right, excellent. See you next time.